Member Info for chilting

The market is absolutely tanking this morning - bloody awful.

Now is that a short term view or is the market move this morning a longer term correction?

Who the hell knows!!!

When politics overrides the well being of the economy expect the worst.

We have seen that with Trump and Brexit.

Without the nationalist policies of Trump and Eton Mess I reckon the world economy would be much better place and Brent would be much closser to $70-$75.

Yes, we shouldn't underestimate the effect of throwing the worlds sixth largest economy into an unnecessary recession - that is bound to depress the oil price.

The interesting thing so far is that ICL haven't produced an NPK mix containing polyhalite.

Its certainly technically possible for them to do so in their Dutch factory and if they did it would certainly substantially out sell the rest of the range - my best guess is that they cannot produce polyhalite fast enough to satisfy projected demand for such a product.

Now that Muntajat have said they will collaborate with SM to produce an NPK product - remembering the Yara link - things could start to get very interesting for SM.

What I mean is - Polysulphate has been proven in the market place - other fertiliser companies have seen the potential - ICL have a hot product but cannot supply enough raw product to satisfy demand - more supply of Polyhalite is needed...

Brent is still stuck with no real direction - todays fall is apparently because Brexit talks are stalling.

This news is for the future - can only be good for Brent in the longer term -

https://uk.reuters.com/article/uk-saudi-russia/saudi-visit-showcases-putins-growing-middle-east-influence-idUKKBN1WT0KP?il=0

The interesting thing so far is that ICL haven't produced an NPK mix containing polyhalite.

Its certainly technically possible for them to do so in their Dutch factory and if they did it would certainly substantially out sell the rest of the range - my best guess is that they cannot produce polyhalite fast enough to satisfy projected demand for such a product.

Now that Muntajat have said they will collaborate with SM to produce an NPK product - remembering the Yara link - things could start to get very interesting for SM.

What I mean is - Polysulphate has been proven in the market place - other fertiliser companies have seen the potential - ICL have a hot product but cannot supply enough raw product to satisfy demand - more supply of Polyhalite is needed...

Myosotis
Sorry I was looking at the Yara report in detail and misinterpreted - the point I should have made is that with earth based resources that have to be mined a fertiliser company needs continuity of supply - therefore there is risk if they run out of one component that they won't be able to supply to produce NPK fertiliser - so they always assessing this risk.

Therefore, they need multiple sources of supply from around the world in case one source of supply becomes unavailable. For example - Yara are having problems with a new Potash mine in Ethiopia at the moment so they may be looking for alternative sources elsewhere.

jonesrichard
The main point is that until we know the degree of dilution there is no way of knowing what will happen to the SP.

What may be great news for SM and the project need not be good news for long term investors - in my experience dilution has always been much worst than expected - especially when the company involved is running short of funds - but it will be great if I am proved wrong..

jonesrichard
I think it looks like we are heading for a deal that involves more equity being issued - it is very important that investors realise the implications of that regarding dilution - it may be a very ling time before we see our investment reach a break even point.

The Muntajat deal actually links to two of SM's shareholders the Qatar Investment Authority and the Norwegian Sovereign Wealth Fund.

The Muntajat production company QAFCO is a joint venture between fertiliser giant Yara and Industries Qatar - Yara own 25%.

The Norwegian Government have a 36.2% stake in Yara and their Pension Fund has another 6.5%

In their 2018 annual report Yara identified lack of Phosphate fertiliser as a potential risk in their supply chain - they also said that they were actively looking for more supplies of specialist phosphate fertiliser.

lovelyboy
Yes, certainly a case of Turkey's voting for Christmas but the alternative would probably be no Christmas at all - wipe out.

Moving on with funding in place SM must be worth £1000m market cap or around 15p per share - about what it was on the 1st August.

Selling equity means sharing so if 50% of the equity is sold that would bring the existing shareholders share of the market cap to £500m or 7.5p per share.

If SM raise funding without giving away equity then the SP would probably be back to 15p in no time.

Then it is just a case of how fast the market cap grows.

Mr.dt
I applaud your sentiment but if we do get another round of dilution that could be the wrong strategy.

It may be much better to wait until things become clear on the funding front and then buy to average down.

The market cap will sort itself out - probably around the £1000m mark.

If we are going down an equity funding path it is I think important to be prepared to work out how this will effect the SP.

Before the 1st August the SP was around 15p this gave us a market cap of around £1000m - so we can use that as an initial valuation of what SM is actually worth with funding - although this is probably a conservative valuation.

Now we come to the likely dilution that we could expect if we had equity funding - my guess is anything between 50-80% - but this is a guess.

That would give an SP at 50% of around 7.5P

But don't forget - he's an irrational d*ckhead.

Not much reason for confidence yet - with Trump this could unravel with one tweet.

Not much reason for confidence yet - with Trump this could unravel with one tweet.

Also this from page 42

"Yara is sourcing from third parties a wide range of raw materials for fertilizer production, not at least phosphate and potash (P&K). Terminations, material change or failure of delivery in these arrangements can have a negative impact on Yara’s operations.
With respect to raw materials, as one of the world’s largest buyer of phosphate and potash, we benefit from scale advantages in sourcing. To mitigate the risk of failure in sourcing of these key raw materials, Yara aims for long-term relationships with a wide network of suppliers, continuously aiming to optimize the company’s phosphate balance. Yara currently evaluates several options for increasing the company’s degree of self sufficiency in specialty phosphate through vertical integration.

Myosotis
Did you see this comment from Yara's 2018 Annual Report - very interesting - especially as it appears under the heading Risk Appetite.

"Speciality phosphate sourcing exposure Securing key raw materials for our fertilizer production is crucial for our production plants. The demand for raw materials is covered by our own production as well as sourcing from third parties. Yara has a low risk appetite and seeks opportunities to increase production of specialty phosphate (P). "

from page 41
https://www.yara.com/siteassets/investors/057-reports-and-presentations/annual-reports/2018/yara-annual-report-2018-web.pdf/

Cherokee
They invest in projects and businesses rather than run things - much better from our point of view.

Maybe they are contemplating a much larger investment?

If CF has convinced them that the SM project is viable that may well be the case - after all why would they negotiate this trade deal if they didn't think the mine would ever be completed.